1976 (8) TMI 41 - HC - Income Tax

Summary

Issues Involved:
1. Whether interest charged under section 139 for the assessment years 1962-63, 1963-64, and 1964-65 is liable to be canceled under section 154 of the Income-tax Act, 1961?

Issue-Wise Detailed Analysis:

1. Interest Charged under Section 139:
The primary issue revolves around whether the interest charged under section 139 for the assessment years 1962-63, 1963-64, and 1964-65 can be rectified and canceled under section 154 of the Income-tax Act, 1961. The assessee, a registered partnership firm, failed to file its income returns within the stipulated time for the mentioned assessment years, leading to the Income-tax Officer charging penal interest under section 139 and levying penalties under section 271(1)(a).

2. Rectification under Section 154:
The assessee applied for rectification under section 154, arguing that the interest charged should be deleted as no applications for extension of time were filed. The Income-tax Officer rejected these applications, stating there was no apparent mistake from the record. The Appellate Assistant Commissioner upheld this view. However, the Income-tax Appellate Tribunal accepted the assessee's contention, referencing a precedent set by the Andhra Pradesh High Court in Kishanlal Haricharan v. Income-tax Officer [1971] 82 ITR 660 (AP), which held that interest could not be charged unless an application for extension of time was filed.

3. Applicability of Supreme Court Precedent:
The Supreme Court in T. S. Balaram, Income-tax Officer v. Volkart Brothers [1971] 82 ITR 50 (SC) clarified that a mistake apparent on the record must be obvious and patent, not one requiring a long-drawn process of reasoning. The Supreme Court's principles were applied to section 154, indicating that debatable points of law do not constitute mistakes apparent from the record.

4. Debatable Question of Law:
The revenue's standing counsel argued that whether interest under section 139 is chargeable without an application for extension of time is a debatable question. The case of Progressive Engineering Co. v. Income-tax Officer [1976] 105 ITR 226 (AP) was cited, where it was held that clause (iii) of the proviso to section 139(1) must be read with section 139(4), implying that interest could be charged even without an application for extension if returns were filed late.

5. Tribunal's Presumption and Differentiation:
The Tribunal presumed that time must have been extended on the application of the assessee, which was not clear from the records. This presumption was based on the precedent that interest is chargeable only when the Income-tax Officer extends time on the assessee's application. However, Obul Reddi J. in Progressive Engineering Co. distinguished this by stating that sub-section (4) of section 139 is automatically attracted if returns are filed late, regardless of an application for extension.

6. Conclusion:
Given the conflicting interpretations and the debatable nature of the law, it was concluded that section 154 was not applicable for rectifying the interest charged. The mistake could only be established through a long-drawn reasoning process, making it unsuitable for rectification under section 154.

Judgment:
The court answered the question in the negative, favoring the revenue and against the assessee. The assessee was ordered to pay the costs of the reference to the Commissioner of Income-tax.